Modelling the innovation value chain.pdf

MS a b a A R R A K I P K B I 1 p e r w d o s f e e ( j 0Research Policy 37 (2008) 961–977 Contents lists available at ScienceDirect Research Policy journa l homepage: www.e lsev ier .com/ locate / respol odelling the innovation value chain tephen Ropera, Jun Dub, James H. Loveb,? Warwick Business School, University of Warwick, Coventry CV4 7AL, UK Centre for Small and Medium-Sized Enterprises, Economics and Strategy Group, Aston Business School, Aston University, Birmingham B4 7ET, UK r t i c l e i n f o rticle history: eceived 31 October 2006 eceived in revised form 6 February 2008 ccepted 15 April 2008 eywords: nnovation roductivity nowledge usiness growth reland a b s t r a c t Innovation events – the introduction of new products or processes – represent the end of a process of knowledge sourcing and transformation. They also represent the beginning of a process of exploitation which may result in an improvement in the performance of the innovating business. This recursive process of knowledge sourcing, transformation and exploitation comprises the innovation value chain.Modelling the innovation value chain for a large group of manufacturing firms in Ireland and Northern Ireland highlights the drivers of innovation, productivity and firmgrowth. In terms of knowledge sourcing, we find strong complementarity between horizontal, forwards, backwards, public and internal knowledge sourcing activities. Each of these forms of knowledge sourcing also makes a positive con- tribution to innovation in both products and processes although public knowledge sources have only an indirect effect on innovation outputs. In the exploitation phase, innovation in bothproducts andprocesses contributepositively to companygrowth,withproduct innova- tion having a short-term ‘disruption’ effect on labour productivity. Modelling the complete innovation value chain highlights the structure and complexity of the process of translating knowledge into business value and emphasises the role of